Trying unsuccessfully to raise capital until the end, online grocer Webvan Group Inc. has closed its doors and will file for bankruptcy, sealing the fate of one of the Internet economy's high-profile experiments.

Launched in June 1999, Webvan promised to revolutionize the supermarket industry by taking customers' orders online and delivering groceries to their doorsteps, a concept that helped the company raise about $800 million from venture capitalists.

But the Foster City company was never able to attract and sustain the kind of customer traffic that would make it profitable, bleeding at least $830 million in losses until it was left with only about $40 million on hand as of June 30.

Webvan's board of directors voted to close the company on Friday, but the company didn't begin to close its distribution centers until Sunday. The company's Web site was also shut down on Sunday, telling customers "We're sorry. Our store is temporarily unavailable while it is being updated. It will be available again soon."

More than 2,000 Webvan employees were let go today. Service was also immediately terminated to over 750,000 active customers in seven markets -- San Francisco, Los Angeles, Orange County, San Diego, Seattle, Chicago and Portland.

"It's a very emotional time for everyone who's been involved with Webvan because we've put our heart and soul into this and now it's gone," said Bud Grebey, Webvan spokesman. "But at the same time, we're very proud of what we've accomplished. As a concept and a business model, we believe that we have made a difference."

Although the company had pledged to find its way in the sluggish Internet economy, its demise was not unexpected. Webvan recently pulled out of the Atlanta and Dallas markets and drastically scaled back its Sacramento operations in an effort to conserve its dwindling cash reserves.

Like toy retailer Etoys, which went kaput after disappointing holiday sales last year, Webvan was a victim of the dot-com "get big fast" mantra, said David Kathman, a stock analyst at Morningstar in Chicago.

"Webvan and Etoys will be two lessons studied in business schools for years to come about the perils of setting expectations too high and locking yourself into those expectations," Kathman said. "If something goes wrong and you fall short, you're in much worse shape than if you held back and tried to grow modestly."

Webvan invested heavily in automated warehouses, logistics software and a fleet of vans. The idea was that technology would help the firm provide groceries more cheaply than brick-and-mortar competitors like Safeway, which had to pay for more employees and expensive real estate in downtown areas. But Webvan never raked in enough sales to make up for its initial expenses.

"They spent so much money on all this infrastructure, which was basically part of their business model," Kathman said. "But what they hoped was going to be their advantage turned out to be their downfall. They got big fast, but size turned out to be an albatross when the demand wasn't there."

One reason demand fell short was that Webvan wasn't as convenient as it billed itself, Kathman said.

"You had to order everything a day or more in advance and set a window when you'd be home so they could deliver this stuff," he said. "The problem was their core audience was obviously very busy people. People like that often don't know exactly where they're going to be a day or two from now. It was more hassle than it was worth. It was just as easy to go to the grocery store. It was sort of the opposite of instant gratification."

But many customers did try out the service and liked the convenience. Lynn Reda, an architect for Palo Alto firm Hill Glazier and a mother of newborn twins, came to depend on the service and was sad to see it go.

"I have not been to the grocery store since my twins were born on April 6," said Reda, a Webvan customer since the beginning. "I am so upset now that I have to spend my time in the grocery store. . . . It took me 10 minutes to place a grocery order online. It took less than five minutes for the guy to come in and drop off my groceries on my kitchen counter -- including stuff like diapers and cosmetic products. That's a 15-minute investment of time, versus now, going to the grocery store is going to be putting the kids in the car, geting to the grocery store, and spending anywhere from an hour and a half to an hour of my time there."

Deb Dubin, a 34-year-old working mom, was mourning the death of Webvan, which was due to deliver her weekly order at 8 p.m. today to her San Francisco home. She entered her last grocery list online Saturday and received no word then that the company was going under.

"It's great for working parents," said Dubin, who is expecting her second child in October. "It was so convenient. It's such a shame."

Webvan had warned that it needed an additional $25 million to stay open, but a downturn in customer orders during the past three months forced the company to burn through even more money than management anticipated.

The company's market value has plunged by $7.2 billion since Webvan's November 1999 initial public offering at $15 per share. The company stock, which had a high of $34 per share shortly after its IPO, was stuck under $1 per share for all of this year and closed at 6 cents Friday. Trading was halted this morning.

The company plans to file for bankruptcy in the next week or two, Grebey said. Under the supervision of a bankruptcy judge, Webvan will draw up a plan for repaying its creditors.

Webvan listed liabilities totaling $96.5 million as of March 31 in its most recent quarterly filing with the Securities and Exchange Commission.

The company's list of unsecured creditors will include Webvan's former CEO George Shaheen, who resigned in April, triggering a clause in his contract that required the company to pay him $31,250 per month for the rest of his life. With the bankruptcy, Shaheen "will have to get in line with the rest of our creditors," Grebey said.

In a sign of the company's desperation, Webvan's shareholders last month approved a 1-for-25 reverse stock split in a last-ditch effort to boost the shares above $1 and avoid being delisted from the Nasdaq stock market.

Employees were told of the news at a 9 a.m. staff meeting. Some took it in stride while others were taken aback and cried, according to employees who were at the meeting.

All of the employees will receive their salaries through Sunday and any unpaid vacation and time off accrued, Grebey said. The 1,700 hourly employees will receive a $900 gift from an anonymous donor and the remaining employees will receive their mid-year bonuses, Grebey said.

"They seemed like a good company," said Brett Lewis, 30, a courier in the Palo Alto and Redwood City area for two years. "I worked with DHL for a couple of years and here they gave us stock options, so it seemed like planning for the future."

Lewis' wife, Phoebe, 29, also lost her job as a computer technician today and he was helping her load her desk items into their car. He blamed part of the company's woes on bad management, complaining that corporate employees frequently were provided with full breakfasts while couriers like him were fed bananas and apples.

"They were just throwing their money around," said Lewis. "They had so much money. I just think it had to do with arrogance."

An employee who gave her name only as Rosana said she had been at the company for just a few months and was surprised to see it fold.

"We're sad," Rosana said. "It was just expanding too fast too soon. I came for the experience, but there are no regrets."

Spokesman Grebey acknowledged that Webvan expanded too soon before figuring out how to make the business model successful in markets like San Francisco, but he said there was no way of knowing that the Internet economy would slow down so quickly, resulting in an impossible climate for raising money.